"Greater confidence in European banks will encourage affordable lending to the wider economy, to households and SMEs" (small and medium enterprises), he said in a statement.

Before stepping into the role, the ECB conducted a stringent financial health check of the eurozone's 130 biggest banks in a year-long audit.

Its results, published late last month, showed a large majority of banks passing the test.

The ECB, in charge of monetary policy for the 18 single currency countries, will see its banking supervisory and interest-rate setting bodies strictly separated from each other organisationally and physically.

The SSM is being housed in the ECB's current Eurotower headquarters in downtown Frankfurt with a totally separate staff -- around 1,000 have been recruited -- from the other ECB employees.

Daniele Nouy, ECB supervisory board chairman, called it a "unique opportunity" to develop a "truly European" system, "building on the best practices of supervisors from across the euro area".